U.S. supply chain too snarled for Biden Christmas fix, experts say
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[October 14, 2021]
By Nandita Bose and Lisa Baertlein
WASHINGTON (Reuters) - President Joe Biden
is pushing to ease supply shortages and tame rising prices in time for
Christmas, but unsnarling U.S. supply lines could take far longer,
experts told Reuters.
Biden brought together powerbrokers from ports, unions and big business
on Wednesday to address shipping, labor and warehousing pain in the U.S.
supply chain, and announced new around-the-clock port operations in Los
Angeles.
As his Republican opposition seizes on possible Christmas shortages to
connect Biden's economic policies to inflation, and try to stall a
multitrillion-dollar spending bill in Congress in coming weeks, the
White House's message Wednesday was that a solution is in sight.
"This is an across-the-board commitment to going to 24/7," said Biden, a
Democrat. The port opening, and a promise from retailers like Target and
Walmart to move more goods at night are a "big first step," he said.
Now, he said, "we need the rest of the private sector chain to step us
as well."
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While more cooperation among the often competing, secretive players in
the U.S. supply chain business is a plus, the White House's impact may
be incremental at best, logistics experts, economists and labor unions
warned.
"What the president's doing isn't going to really hurt. But at the end
of the day, it doesn't solve the problem," said Steven Ricchiuto, U.S.
chief economist at Mizuho Securities.
Americans, already by far the world's biggest consumers, have simply
been buying a lot more stuff during the pandemic, much of it imported.
Couple that with labor shortages, equipment shortages and a lack of
space to store that stuff, nationwide.
Players from ports to retail chains are already working full-tilt to
handle the pandemic-fueled surge in imports and get holiday gifts onto
shelves and e-commerce centers in time for the Nov. 26 Black Friday
kickoff of the 2021 holiday season.
Imports at the Port of Los Angeles - the No. 1 gateway for ocean trade
with China - are up 30% so far this year over last year's record.
But that has left some 250,000 containers of goods stacked up on the
docks due to delayed pickups, from chassis shortages and a lack of space
in rail yards and warehouses. And that is causing dozens of ships to
back up at anchor outside the port.
"The analogy would be the boa constrictor that ate the mouse. There's a
lump in it and the lump is the constraint in the throughput of the
supply chain, and it moves along each time you solve for a constraint,"
said Joe Dunlap global head of the supply chain advisory team at CBRE
Group, a commercial real estate services firm.
'YOU DON'T BUILD A CHURCH FOR CHRISTMAS'
Frank Ponce De Leon, International Longshore & Warehouse Union Coast
Committeeman summarized the problem at U.S. ports, which the Commerce
department estimates handle 76% of all trade, during comments last week.
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"You don't build a church for Christmas and Easter; you build it for a
regular Sunday service," he said. "With the unprecedented influx of
cargo, it's like Christmas and Easter on the docks every single day,
with more ships coming in and the pews have been full for months, and
there's nowhere left to sit - or stand."
Dockworkers remain available for 24-hour shifts to help clear the port
backlogs, the longshore union said. But that is not true of the people
who move goods from the ships or from ports, other unions say.
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![](../images/101421pics/news_f11.jpg)
Shipping containers are unloaded from ships at a container terminal
at the Port of Long Beach-Port of Los Angeles complex in Los
Angeles, California, U.S., April 7, 2021. REUTERS/Lucy Nicholson
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"One of the major problems with the current state of
logistics is the shortage of port truck drivers. They are not paid a
living wage," said Teamsters General President Jim Hoffa, who
participated in the meeting with Biden.
The backup may be exacerbating that shortage, because many port
drivers are not paid for the hours they spend waiting to pick up a
container, making the job less appealing.
Still, there is no evidence experienced workers are sitting on the
sidelines - U.S. transportation and warehousing are employing more
people now then they did before the pandemic started, data from the
Bureau of Labor Statistics show.
Graphic: Transportation hiring is back to pre-pandemic levels ,
https://graphics.reuters.com/USA-ECONOMY/COVID-JOBS/xmpjokbmdvr/chart.png
WAREHOUSES OVERFULL, UNDERSTAFFED
Like seaports, warehouses work best when they are moving products in
and out quickly and predictably. Instead, port officials say, they
are packed to the rafters and struggling with employee hiring and
retention.
U.S. companies are leasing warehouse space at record levels to
handle the large influx of goods for e-commerce.
The markets that serve Southern California ports include Los Angeles
and the Inland Empire region nearby, which had second-quarter
vacancy rates of 1.2% and 1.4%, respectively, according to CBRE
data.
"Space is clearly tight," Dunlap said.
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It is not just that warehouses are at capacity, Steve DeHaan, CEO of
the International Warehouse Logistics Association, said in a recent
letter to John Porcari, port envoy for the White House Supply Chain
Disruptions Task Force.
Warehouse owners, tenant and workforce employers can be different
companies, which makes drawing up new contracts to pay
round-the-clock workers difficult. "The warehouse cannot arbitrarily
make this decision," DeHaan said.
Moving a warehouse to 24/7 operations adds another layer of risk, he
said.
"For example, receiving a container at 6 a.m. that was scheduled for
3 a.m. delivery disrupts operations for the entire day," DeHaan
said. "The goal of reducing container congestion over the next 90
days is ambitious."
(Reporting by Nandita Bose in Washington and Lisa Baertlein in Los
Angeles; Editing by Heather Timmons and William Mallard)
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